South Korea's Kolon accused of stealing trade secrets

By: Frank Esposito

October 19, 2012

WASHINGTON (UPDATED Oct. 19, 12:10 p.m. ET) — South Korean chemicals firm Kolon Industries Inc. and five of its employees have been indicted by the U.S. Department of Justice for allegedly stealing trade secrets related to DuPont Co.’s Kevlar material and to a similar product made by Teijin Ltd.

The indictments come a little more than a year after DuPont was awarded almost $920 million in a related trade-secrets lawsuit against Seoul-based Kolon. Kolon allegedly obtained confidential information about production of DuPont’s Kevlar-brand and Teijin’s Twaron-brand para-aramid fibers between 2002 and 2009 from former employees of both firms, Justice Department officials said in an Oct. 18 news release. Kolon then used this information to produce its own Heracron-brand para-amid fibers.

“Kolon is accused of engaging in a massive industrial espionage campaign that allowed it to bring Heracron quickly to the market and compete directly with Kevlar,” U.S. Attorney Neil MacBride said in the release.

Assistant Attorney General Lanny Breuer added in the release that “by allegedly conspiring to steal DuPont’s and Teijin’s intellectual property, Kolon threatened to undermine an economic engine at both companies.”

In an Oct. 18 statement from Wilmington, Del.-based DuPont, Senior Vice President and general counsel Thomas Sager said the firm “believes in a fair and level playing field, and will remain vigilant in protecting and enforcing our trade secrets.”

“Today’s announcement of the indictment speaks for itself and constitutes a major step in bringing this matter to a conclusion,” Sager said. “We will continue to pursue enforcement of our civil judgment in the United States, Korea and around the world.”

In one of the incidents, Kolon employees met with a DuPont employee at a hotel in Richmond, Va., in 2008 to discuss how the DuPont employee could provide Kevlar-related trade secrets without leaving evidence. In a separate incident, a Kolon employee copied information from a CD owned by a former DuPont employee who was working as a consultant to Kolon. The CD contained a detailed breakdown of DuPont’s capabilities and costs for its Kevlar products, customer pricing information and related data.

The indictment seeks at least $225 million in forfeiture — representing what Kolon profited from Heracron sales from January 2006 through June 2012 — as well as $341,000 in payments made to former DuPont employees in exchange for trade-secret information.

Officials with Kolon and with Osaka, Japan-based Teijin could not be reached for comment. Teijin has a sales office in Atlanta, while Kolon operates its API-Kolon distribution unit in the Chicago area.